The Palm Pre Plus is now only 1 penny, with a new two year contract, via Amazon.com.

Buyers can get a free Pre Plus with 2 year contract on the Verizon network, from Palm

Hedge
fund manager and former star hockey player at Harvard
University Philip Falcone revealed in a regulatory filing
on Tuesday that he had taken
a 9.48 percent stake (16 million shares) in mobile
handset maker Palm. Falcone is known as an activist investor
with his share of ups and downs. In 2007 he became famous when
he bet against subprime mortgages and his funded doubled. In
2008, he reportedly posted a double digit loss after betting wrong on
oil prices and being unable to short sell certain stocks thanks to
new laws. In 2009, though, he recouped posting a 45 percent
gain.

After the announcement of Falcone's stake, Palm share
jumped 10 percent, then settled down to a gain of 3.1 percent.

Palm
can use all the help it can get. Its stock is in shambles and
it has a huge backlog of unsold handsets, which took take over a year
to sell. Palm's production is currently halted and there's no
new handsets known to be in store for the second half of the
year.

The company is resorting to fire
sale tactics on the Verizon network, selling its Pre Plus
smart phones at two for $49.99 and its Pixi Plus smart phones at two
for $29.99 thanks to a price drop and Verizon's "Buy One Get
One" promotion. More incredibly, on Amazon.com you can get
a single Pre Plus handset for
$0.01 (the phone retails without contract for $699.99).
That phone also comes with free 3G hotspot capabilities (as do all
Palm smart phones on Verizon's network).

Palm CEO Jon
Rubinstein remains
optimistic that the company will pull through this tough
time. The company has $590M USD in cash to weather the storm.
That cash also makes it an attractive acquisition target.
There's been rumors that Palm is looking to sell
itself to the highest bidder and that HTC was among the
interested parties.

Palm currently sits in fifth place on the
smartphone market, behind Google, Microsoft, Apple and Research in
Motion.

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This article is over a month old, voting and posting comments is disabled

Actually, I discussed how them buying the stock increased its price, thus protecting existing shareholders and strengthening the company's ability to survive or be acquired on more favorable terms. From the facts provided, it looks to me like all they've done is positive from the perspective of existing shareholders, employees and the company itself. The fund has certainly done more good for Palm than the management has!

Regarding funds moving stock prices, mutual funds, institutions, hedge funds and retail investors as a whole all move prices when they trade. Price manipulation can work over the short term, but has little effect beyond the day or two after it takes place and activity returns to normal. Everyone except retail investors do it, and the only reason retail investors don't is because they can't organize effective numbers.

As for the issue you raised of shorts borrowing stock, that's standard practice throughout the industry which in practice doesn't have nearly the impact you ascribe it to. If you really don't like it, trade your own stocks and disallow your brokerage from renting your shares. Otherwise, purchase funds from companies like Vanguard who returns their profits to fund-holders after paying their expenses.

Ultimately, whether it's hedge funds, institutions, or mutual funds the goal is the same -- to profit. They can only be relied upon to do so within the regulatory AND enforcement framework provided to them by the government. To the extent that their behavior is unacceptable, it's the government's problem, not theirs. We can all think of the managers as poorly as we choose (I know I do), but they're just doing what the government says is OK.